First Deep Look at Costs AND Benefits of Northeast Cap-and-Trade Program Shows it a Clear Winner

Mariella Puerto

For three years, the Regional Greenhouse Gas Initiative (RGGI) – a collaborative effort of 10 Northeast and Mid-Atlantic states – has been testing the nation's first cap-and-trade scheme to reduce carbon emissions.

For three years, the Regional Greenhouse Gas Initiative (RGGI) – a collaborative effort of 10 Northeast and Mid-Atlantic states – has been testing the nation’s first cap-and-trade scheme to reduce carbon emissions. The commitment from participating states has been wavering lately. New Jersey announced it would be pulling out. Some others are threatening to do the same. However, a new report by the Boston-based Analysis Group about the significant economic benefits RGGI has created already might give them pause.

Since the cap-and-trade scheme was launched in 2009, participating states have raised nearly $790 million from auction of emissions permits to utilities – which typically pass these costs along to their customers in the form of higher rates. While these costs have been widely reported from the onset, a clear-eyed view of the benefits side of the equation has been missing.

Earlier this year, thanks to the leadership of The Merck Family Fund, Barr joined with other funders – to support research to address this gap. We sought a well-respected, highly-qualified consulting firm to develop and share an objective, rigorous analysis of both costs and benefits of the RGGI cap-and-trade approach. Without that complete view, we knew there would be little hope of improving RGGI – let alone see it given serious consideration in other regions or nationally. With Barr’s particular focus on Massachusetts, we were also interested in seeing how investing proceeds back into energy efficiency (which Massachusetts did) compared to alternative approaches pursued by other states.

The report's key findings?

$1.6 billion in economic value added to the regions economy

$1.1 billion in customer savings on electricity bills and $174 million on natural gas and heating oil bills over the next decade through installation of energy efficiency measures using funding from RGGI auction proceeds to date

16,000 jobs created across the region

$765 million kept in the local economy based on reduced demand for fossil fuels

Even though power plant owners experienced a $1.6 billion decline in revenue during the 2009-2011 period, overall they remained profitable as a result of RGGI

As the Merck Family Fund notes on their blog, news of this report and its findings, “has reached local and national audiences with more than 11 million impressions in traditional and online media. The Baltimore Sun wrote in an editorial ['Cap and Economic Growth'] on Nov. 15th, 'Cap-and-trade isn’t the jobs killer that the naysayers claimed but a boost to the economy at a time when jobs are at a premium.' The authors are now making the rounds with businesses, legislators, federal agencies, and even White House staff!”